The Steel Stock Bubble

Steel stocks such as Cleveland Natural Resources (CLF), US Steel (X), AK Steel (AKS), Reliance Steel and Aluminum (RS), Steel Dynamics (STLD) to count a few are all rallying with the steel stock upgrade by JPMorgan and idiotic speculation about an economic recovery increasing demand fro steel. Part of it is, also, an increased demand for hard assets and companies that are rich with hard assets. As much as being a big proponent of the hard asset theory, from a valuation standpoint the prices of these stocks makes no sense especially with where the economy stands and will stand over the next few years. I am personally starting to build short positions in some of these stocks. Given how moronic most investors of these stocks are as we have witnessed in the crash in the last couple years in the prices of these stocks, I am starting with small short positions. Part of it is, also, hedge funds such as Harbinger build positions in these stocks (Harbinger did this during the last crash of these stocks and mostly in CLF) and then try to support and push the prices of these stocks up as long as they can until it all crashes on them and they almost go bust as did Harbinger during the crash. The same thing will happen, but we do not want to stand in the way of the train if these people can keep the bubble up. My bet is they cannot keep it for more than a few more months, but who knows. If the price keeps going up, I will continue building bigger positions in these stocks because I have high conviction the economic reality will catch up with the markets eventually. I am making my plans assuming this can last close to two years, which most likely will not happen. One of the ways I am putting my shorts on is using my usual put option strategy of buying out of the money puts a few months out and continuing to add to these or roll them according to market action.